On 22 March 2019, the Act modifying the specific corporate tax exemption for social passive was published: the exemption now needs to be spread over 5 years.
As a short recap, article 67quater Belgian Income Tax Code 1992 (introduced by the Act of 26 December 2013) allows Belgian companies and Belgian establishments to exempt part of their corporate tax basis. This is the so-called “exemption for social passive”. This exemption was introduced following the unified employment status, and is in practice applicable as from 1 January 2019.
The goal of this corporate tax exemption is to temper the extra costs associated with the prolonged notice period for blue-collar workers.
The exemption can be claimed – via the corporate tax return – provided that some conditions are met.
The amount that can be exempt is 3 weeks of gross monthly salary of the respective employee, as from the 6th service year and starting as from 1 January 2014. As from the 21th service year, the amount is limited to 1 week of gross monthly salary.
The gross monthly salary is capped at EUR 2.600. The maximum amount of 3 weeks of gross monthly salary is determined at 100% of the first tranche of gross salary up to EUR 1.500 and to 30% of the tranche of gross salary between EUR 1.500 and EUR 2.600.
If the employee leaves the company, the exemption claimed for the respective employee should be reversed and as such reflected in the corporate tax return.
Modification by the Act of 11 February 2019
The Act of 11 February 2019 (published in the Belgian Official Gazette of 22 March 2019) modifies the exemption regime: the exemption now has to be spread over a five-year period for budgetary purposes.
What is the advantage for companies?
The advantage of this measure is the (temporary) decrease of the taxable base, which should result in a (temporary) decrease of corporate tax payable for many companies. The exemption for the company could be up to EUR 1.267 per employee.
The measure should in particular be important for companies with a relevant amount of employees working for more than 5 years in the company and, if applied, should have a positive impact on the calculation of the advance tax payments and estimated tax provisions as from 2019.
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